Upward Mobility for China Mobile

Thinking of diversifying into mobile technology equity? China Mobile may be a good option the company provides telecommunication services. The Company offers wireline voice, broadband, roaming, and other related services. China Mobile serves customers in Hong Kong.

China Mobile FY18 earnings was slightly ahead of market estimates, with + 2% EBITDA growth and + 3.7% service revenue growth YoY driven by strong data revenues despite regulatory and competitive pressures to lower prices. The company had boosted its earnings by cutting costs and improving operational efficiency, while higher spending on ongoing 5G network upgrades also throttled its earnings growth. As the largest wireless carrier in China, and its status as a state-backed enterprise that limits its downside potential, China Mobile provides defensive hedge against rising volatility. The company seeks to benefit from rising 4G demand and increasing mobile data usage, while its strong balance sheet puts it in a competitive position to fund potential regulatory-driven 5G CAPEX.

Yet, it is still important to consider some potential risks. For example:

1. Fixed line erosion - Faster than expected subscriber churn or ARPU decline would be negative for the company.

2. Intensifying Competition - Risk remains that competitors may start price wars to maintain or gain market share. Such moves would be value destructive to the sector.

3. Regulatory Risk - The telecoms sector is heavily regulated and regulatory developments in this space could affect the operation and profitability of the sector.